Under McKennon v. Michigan Consolidated Gas Co., an employer that discovers evidence of employee wrongdoing after an unlawful termination cannot use that evidence to entirely avoid liability, but can use it to limit the available remedies. The Supreme Court reasoned that allowing after-acquired evidence to be a complete defense would let employers escape liability for discrimination as long as some post-hoc justification for termination could later be found, undermining the statute's deterrent purpose.

The remedy limitation typically caps back pay at the period between the unlawful termination and the date the employer discovered the after-acquired evidence, rather than running through trial or judgment, and generally forecloses reinstatement and front pay. The employer bears the burden of proving both that the wrongdoing occurred and that it would have led to termination had it been known at the time, a standard that requires more than showing termination was merely possible.

The doctrine effectively creates a damages cutoff date determined by discovery timing rather than by the underlying merits of the discrimination claim itself, decoupling liability exposure from remedy exposure in a way many single-figure damages estimates miss. In Juricratic, after-acquired evidence is modeled as a distinct damages-cutoff dial layered on top of, but analytically separate from, the underlying liability dials, so a simulation can show a case with strong liability evidence but a sharply truncated damages exposure once a credible after-acquired-evidence defense is entered.

Employers that discover post-termination wrongdoing document the discovery date precisely and gather independent evidence the conduct would genuinely have resulted in termination under established policy, since a defense built on speculative or inconsistently enforced policies is vulnerable to challenge. Plaintiff's counsel challenges the doctrine by showing similarly situated employees who engaged in comparable conduct were not terminated, undercutting the would-have-fired showing.